{"id":4104,"date":"2017-11-23T00:00:00","date_gmt":"2017-11-23T05:00:00","guid":{"rendered":"https:\/\/currencylive.com\/100240-gbp-usd-uk-budget-us-inflation\/"},"modified":"2017-11-23T00:00:00","modified_gmt":"2017-11-23T05:00:00","slug":"100240-gbp-usd-uk-budget-us-inflation","status":"publish","type":"post","link":"https:\/\/currencylive.com\/news\/100240-gbp-usd-uk-budget-us-inflation\/","title":{"rendered":"Pound Boosted by UK Budget While Dollar Suffers on Fed Inflation Fears"},"content":{"rendered":"

The pound charged higher versus the dollar in the previous session. UK Chancellor Philip Hammond successfully diverted attention away from weak UK growth forecasts with his budget announcement. Meanwhile, in the US, investors focused on US Fed concerns over inflation in an otherwise positive US policy meeting in November. The pound surged northwards as a result of US concerns, hitting a high of US$1.3325 for the pound.<\/p>\n\n\n\n\n\n
What do these figures mean? <\/th>\n<\/tr>\n<\/thead>\n
\n

When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute. <\/p>\n

For example, it could be written: 1 GBP = 1.28934 USD<\/em> <\/p>\n

Here, \u00a31 is equivalent to approximately $1.29. This specifically measures the pound\u2019s worth against the dollar. If the US dollar amount increases in this pairing, it\u2019s positive for the pound.<\/em> <\/p>\n

Or, if you were looking at it the other way around: 1 USD = 0.77786 GBP<\/em> <\/p>\n

In this example, $1 is equivalent to approximately \u00a30.78. This measures the US dollar\u2019s worth versus the British pound. If the sterling number gets larger, it\u2019s good news for the dollar.<\/em> <\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n

The worst part of the UK Budget was dealt with quickly at the beginning of the UK Chancellor\u2019s speech. The Office for Budget Responsibility (OBR) slashed UK 2017 growth forecasts from the 2% predicted in March to just 1.5%. Meanwhile, 2018 economic growth was revised down to 1.4% from 1.6% and the OBR predicted growth of just 1.3% in 2019 and 2020. The weak figures sent the pound sharply lower.<\/p>\n\n\n\n\n\n
Why does poor economic data drag on a country\u2019s currency? <\/th>\n<\/tr>\n<\/thead>\n
Slowing economic indicators point to a slowing economy. Weak economies have weaker currencies because institutions look to reduce investments in countries where growth prospects are low and then transfer money to countries with higher growth prospects. These institutions sell out of their investment and the local currency, thus increasing supply of the currency and pushing down the money\u2019s worth. So, when a country or region has poor economic news, the value of the currency tends to fall. <\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n

Despite poor news, Chancellor Hammond was quick to move to an upbeat tone, pleasing pound investors with his spending revelations. Of particular interest to pound traders was the Chancellor\u2019s pledge to put aside a further \u00a33 billion for Brexit preparations. This extra funding is set aside to help the government prepare for every possible outcome from Brexit, including a cliff edge or hard Brexit. The news was well received by the hard line Brexiters in the UK Conservative party and may help to stabilize in-fighting within the party.<\/p>\n

Today, investors will switch attention back towards UK economic data. Analysts are forecasting that UK third quarter economic growth will be 1.5% year on year, or 0.3% quarter on quarter. Should the data surprise on the upside, the pound could rally higher.<\/p>\n

<\/a>US Fed Concerns Over Dollar Inflation Sends Pound Higher<\/h2>\n

The dollar continued to weaken after the release of the US Federal Reserve minutes from the November monetary policy meeting. The minutes from the meeting, where interest rates were kept on hold, confirmed to a degree what investors already knew.<\/p>\n

The US policymakers generally agreed that the American economy was poised for strong growth; they remained happy with the progress of the US labour market. Several Fed members also said that they were increasingly confident that the US Congress would pass the proposed tax cuts, which should boost business investment.<\/p>\n

However, the Fed remained stumped over the low levels of inflation. US inflation refuses to significantly pick up, despite low levels of unemployment which support consumer spending. In conclusion, dollar investors are confident that a rate hike is coming in December. However, after December, there\u2019s nothing assured. As a result, the growing uncertainty of the possibility of US rate hikes next year kept the dollar out of favour.<\/p>\n\n\n\n\n\n
Why do raised interest rates boost a currency\u2019s value? <\/th>\n<\/tr>\n<\/thead>\n
Interest rates are key to understanding exchange rate movements. Those who have large sums of money to invest want the highest return on their investments. Higher interest rate environments tend to offer higher yields. So, if the interest rate or at least the interest rate expectation of a country is relatively higher compared to another, then it attracts more foreign capital investment. Large corporations and investors need local currency to invest. More local currency used then boosts the demand of that currency, pushing the value higher. <\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n\n\n\n
\n


\nThis publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Inc., Currency Live or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. Consult our risk warning<\/a> page for more details.<\/em><\/small><\/p>\n

This article was initially published on TransferWise.com from the same author. The content at Currency Live is the sole opinion of the authors and in no way reflects the views of TransferWise Inc.<\/em><\/small><\/p>\n","protected":false},"excerpt":{"rendered":"

The pound charged higher versus the dollar in the previous session. UK Chancellor Philip Hammond successfully diverted attention away from weak UK growth forecasts with his budget announcement. Meanwhile, in the US, investors focused on US Fed concerns over inflation in an otherwise positive US policy meeting in November. The pound surged northwards as a […]<\/p>\n","protected":false},"author":163946597,"featured_media":4105,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1379,1381],"tags":[1394,1387,1398],"class_list":["post-4104","post","type-post","status-publish","format-standard","has-post-thumbnail","category-gbp","category-usd","tag-gbp","tag-inflation","tag-usd"],"acf":[],"yoast_head":"\nPound Boosted by UK Budget While Dollar Suffers on Fed Inflation Fears - Currency Live<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/currencylive.com\/news\/100240-gbp-usd-uk-budget-us-inflation\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Fiona Cincotta\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100240-gbp-usd-uk-budget-us-inflation\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100240-gbp-usd-uk-budget-us-inflation\\\/\"},\"author\":{\"name\":\"Fiona Cincotta\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#\\\/schema\\\/person\\\/8ef0fafb6c93f1204150bb907b42cfec\"},\"headline\":\"Pound Boosted by UK Budget While Dollar Suffers on Fed Inflation Fears\",\"datePublished\":\"2017-11-23T05:00:00+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100240-gbp-usd-uk-budget-us-inflation\\\/\"},\"wordCount\":897,\"image\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100240-gbp-usd-uk-budget-us-inflation\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/currencylive.com\\\/news\\\/wp-content\\\/uploads\\\/2019\\\/08\\\/100240-gbp-usd-uk-budget-us-inflation.jpg\",\"keywords\":[\"gbp\",\"Inflation\",\"usd\"],\"articleSection\":[\"GBP\",\"USD\"],\"inLanguage\":\"en-US\",\"copyrightYear\":\"2017\",\"copyrightHolder\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#organization\"}},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100240-gbp-usd-uk-budget-us-inflation\\\/\",\"url\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100240-gbp-usd-uk-budget-us-inflation\\\/\",\"name\":\"Pound Boosted by UK Budget While Dollar Suffers on Fed Inflation Fears - 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